France switches Credit Lyonnais debt legacy

17th November 2004, Comments 0 comments

PARIS, Nov 17 (AFP) - France has decided to switch management of a legacy of debt left by Credit Lyonnais bank essentially to underwrite outstanding legal claims, the finance ministry said on Wednesday.

PARIS, Nov 17 (AFP) - France has decided to switch management of a legacy of debt left by Credit Lyonnais bank essentially to underwrite outstanding legal claims, the finance ministry said on Wednesday.

The arrangement also covers debts left by the GAN insurance group and by a business called Comptoir des Entrepreneurs.

All three figured in a list of companies for which the state had responsibility but which got into financial difficulties in the 1990s.

By far the biggest problems arose at Credit Lyonnais, briefly the biggest bank in Europe, which was rescued by state aid from collapse owing to rapid international expansion and faulty management practices.

The amounts involved were huge, but difficult to quantify. The Credit Lyonnais affair shook the French financial establishment and contributed to change in French culture towards state intervention in running big companies.

Part of the rescue procedure, notably for Credit Lyonnais, was to divest doubtful or non-performing assets into separate state entities to relieve the companies of crippling debt.

The ministry said in a statement on Wednesday: "The structures set up nearly 10 years ago to deal with the crisis in the state and quasi-state financial sector have achieved their main objectives which was to deal in the best possible way with separated assets so as to reduce the cost for the taxpayer to the strict minimum.

"Now that this mission is almost completed, it is time to turn the page."

The different bad-debt structures are to be brought together under the responsibility of the huge quasi-state financial institution called the Caisse des Depots et Consignations (CDC).

This would protect outstanding interests of the state because some legal issues and other risks could remain for years, the statement said.

The power of the CDC would also enable the state to recover outstanding amounts due, and consolidation of the entitities would result in rationalisation of management.

© AFP

Subject: French News

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